[Date]
[Promoter Names]
[Company Name]
[Company Address]
Dear [Promoter Names],
The purpose of this letter is to confirm our interest regarding an investment by The Chennai Angels (TCA), referred to as the ‘Investor’, in [Instrument]
of [Company Name] (‘Company’ or ‘[Company Short Name]’). We would like to thank you for inviting us to consider an investment in the Company.
We strongly believe that [Company Name] and we have the potential to forge a strong and productive relationship.
If you have any questions regarding this letter, please do not hesitate to contact us.
Very truly yours,
Authorized signatories
The Chennai Angels
We are pleased to submit for your consideration this Term Sheet, which intends to describe, for purposes of discussion, the key terms of the proposed investment (hereinafter referred to as the “Investment”) in the company by The Chennai Angels. TCA is considering an investment of [INR/USD] as described below.
| “COMPANY” AND “INVESTOR” |
“Company”: [Details of Company, Founders/Promoters, Product/Service]
Investor: The Chennai Angels (TCA) shall include all the Investors proposing to invest in the Company through the current transaction. The details of each individual Investor collectively forming part of this investment will be provided at the time of the final documentation. |
INVESTMENT |
Investment in XXXXX shares at a fully diluted Price per share of YY in Preference Shares based on a pre-money valuation of Rs [Total Investment INR/USD] for Y shares, fully diluted, including unallocated 5% option pool. |
FOUNDER MATTERS |
Vesting of Founder / Promoter existing shareholding over [4] years of continuous service from the investment completion date.
Founder / Promoters shall not enter into any competing business of the Company as long as TCA remains invested. Each Founder / Promoter shall have assigned all relevant intellectual property to the Company prior to closing. The Company shall enter into suitable employment and non-compete agreement with founders/promoters and other key management to the satisfaction of the Investor. Promoters shall be full time and shall execute a suitable agreement inter-se.. |
| BOARD OF DIRECTORS |
TCA will have the right to appoint (and replace at its option) One Director and One Observer, to be chosen by TCA investors. TCA Director shall enjoy certain consent rights, be non-executive, and shall be on all the Committees. The company will provide D&O liability insurance for [3] Crores to the TCA director. |
| RIGHTS | The Series Seed will be given information, inspection, and economic rights including Drag, Tag, ROFR, Anti-Dilution, Pre-Emption, and pro-rata subscription to the new issue of shares. TCA would enjoy certain rights as a block and other rights on an individual basis as will be laid out in the SHA. |
| ANTI DILUTION | At any time after the Investment, if the Company proposes to issue any equity or equity-related securities to any person(s) other than the Investors at a price lower than that paid by the Investor, the Investor shall be entitled to receive corresponding additional equity on an as-converted basis from the Company based on a weighted average anti-dilution protection basis. |
| LIQUIDATION PREFERENCE | One times the Original Issue Price plus declared but unpaid dividends on each share of Series Seed, or pro-rata whichever is higher. A merger, reorganization, or similar transaction will be treated as liquidation. |
| EXIT OPTIONS | By the 5th Anniversary of the Investment, the Company and Promoters shall provide a complete exit to the Investor via a secondary sale, strategic sale, Company/ Promoter buyback, or IPO. Post the 5th Anniversary, investors shall have the right to sell their shares to any financial/strategic investors, cause an IPO, or affect a drag on the shareholders to facilitate a complete exit. |
| CONDITIONS PRECEDENT & CONDITIONS SUBSEQUENT | The investment is subject to a satisfactory outcome of the detailed financial, legal and business due diligence, agreement on contractual terms, the fulfillment of conditions precedent and subsequent as laid out in the share sale and holding agreement, and receipt of statutory and company shareholder approvals. |
| EXPENSES | The Company shall bear the cost of conducting financial/legal/business due diligence and drafting of definitive agreements subject to the cap of 2% of the investment.
The Company shall pay Chennai Angels Network Association an amount equal to 1% of the total investment amount for facilitating the investment. The Company shall bear the costs of quarterly audit post-investment and costs relating to investor attendance at board meetings. |
AGREED, ACCEPTED, AND ACKNOWLEDGED BY
For and on behalf of The Chennai Angels
Name: [Deal Champion Name]
Title: Deal Champion
Name: [Deal Champion Name]
Title: Deal Champion
For and on behalf of [Company Name] and Promoters
By: ____________________
Name: [Promoter 1 Name]
Title: Deal Champion
By: ____________________
Name: [Promoter 2 Name]
Title: Deal Champion
